To DTC or Not to DTC? How Direct-to-Consumer Is Evolving

Remember when everyone thought that direct-to-consumer brands needed to be small and scrappy like Dollar Shave? Well, Dollar Shave grew up (Unilever bought the company for $1 billion) and so has DTC. A quarter of all Americans shop from DTC brands, and the big guns such as Coca-Cola, M&M’s, and Nike are all in. And DTC is getting bigger and bigger amid the rise of the stay-at-home economy. Here are four ways DTC is evolving in 2021:

1. DTC Is a Land Grab for Big Brands 

Across every category, from consumer-packaged goods to apparel, DTC is growing. 

Adidas recently announced an aggressive expansion of its DTC business, which should account for half of the company’s revenue by 2025. And Adidas has plenty of company in activewear, with Nike generating $12.4 billion from DTC in 2020 and Under Armour making $1.8 billion from DTC. Large, global firms are well positioned to succeed with DTC. They already possess the infrastructure and fulfillment capabilities to expand their DTC operations. They have something else, too: first-party data about their customers. As Apple and Google wage a war against third-party cookies (and by extension, third-party customer data), more businesses need to figure how to use first-party customer data to create personalized experiences. Once the big brands figure out how to manage their own first-party data, they can wield an enormous advantage over niche players. And they will. 

2. DTC Is a Customer Experience

DTC is becoming a more customer-focused and delightful experience. In 2020, we showcased on our blog how a number of companies in the spirits category have been differentiating themselves through immersive websites that rely on storytelling and customer experiences. For example, Flaviar, a self-described “club for spirits enthusiasts,” prides itself in making rare and exotic spirits brands available. But Flaviar does more than deliver exotic brands. Members receive an experience that includes tailored recommendations, personalized samples, themed tasting boxes, and incredibly lively and educational commentary on spirits brands in its inventory.

But spirits companies are not alone. M&M’s has created a completely immersive DTC site that makes it possible for people to customize M&M product orders and enjoy a tour of the M&M Store in Disney Springs in 3D. And Isobar helped kitchenware manufacturer Zwilling build a DTC “complete kitchen inspiration” experience that fuses e-commerce with storytelling to rival the best retail sites online. To bridge inspiration with transaction, the site caters each customer’s experience with precise yet scalable content. Zwilling.com is now delivered in 22 languages around the world. In three months, more than 50,000 new users joined the site and sales skyrocketed in the U.S. by more than 50 percent.

3. DTC Is Blurring the Lines with Retail

In some cases, DTC firms are morphing into multichannel merchants. Warby Parker eyewear, which got its start as a DTC company, now operates with hundreds of stores. Olive & June, which sells nail polish products via DTC, also operates a physical location to provide nail services – making the brick-and-mortar location something like a showroom to advertise its products while offering value-added services. But many brands lack the capital to open stores – so they’re partnering with retailers such as Target and Walmart to provide product samples to customers. In the pre-pandemic days, product sampling happened in the store, but those days are over for now. So DTC companies are getting creative. For instance, Cure Hydration has partnered with Walmart to provide product samples through Walmart’s curbside pick-up. Here’s what we think will happen: Walmart will tap into its first-party customer data to make it possible for DTC companies to provide more personalized product samples.  

4. DTC Is Embracing Social Media

Nike is building a new DTC experience known as Nothing But Gold, which Nike says is a “new kind of shopping app dedicated to sport, style, and self-care.” It’s designed (in Nike’s words) “for girls who ‘Just Do It’ their own way.” It’s built on the premise that its customers deserve a say in the products that they buy. What really intrigues us is how Nothing But Gold will be a branded social media app, meaning Nike will create a community of like-minded fans without needing to use someone else’s social media app. According to Women’s Wear Daily, Nothing But Gold will combine sport, style, activism, and mindfulness to inspire community members – and sell Nike products, too. Here again, we see how Nike operates at an advantage: after signing up new Nothing But Gold members on Instagram and presumably porting that customer data over to the Nike branded app, Nike will possess a treasure trove of first-party data on which to build a community. How many more DTC/social commerce experiences such as Nothing But Gold will emerge?

One certainty is clear: DTC is mainstream, and providing a lovable customer experience will separate the leaders from the followers. 

Contact Isobar

If you’d like to learn more about how we can help you succeed by creating a more personalized experience through DTC, contact Asher Wren to schedule a free consultation.

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